Moore on Pricing: Increasing the intermodal mix

in 2012, the prudent shipper has to be looking for options to traditional long-haul trucking in an attempt to control costs and ensure that capacity is available to sustain operations.

By ·

In 2012, the prudent shipper has to be looking for options to traditional long-haul trucking in an attempt to control costs and ensure that capacity is available to sustain operations. 

Fuel prices continue to trend up, while large numbers of professional truck drivers are retiring or leaving the business according to the research firm Global Insight. In fact, their projection in 2005 of an ongoing shortage of over 50,000 drivers per year was only temporarily delayed by the recession and the extension of some careers by older drivers. The pain of a trucking equipment shortage has been avoided due to the growth in intermodal rail capacity, government tax incentives to buy new trucks, and a sluggish economy.

The first and most obvious option for shippers to control costs and ensure capacity is to find those lanes of freight movement that lend themselves to intermodal conversion. In many cases, the rates can be better while service is competitive. Choosing between truckload and intermodal services, however, is not as easy as either clicking highway or rail. There are a growing number of options to consider.

Intermodal usage is less dependent upon proximity to rail yards; in fact, many truck carriers have integrated rail into their key lanes reducing the role on short-haul draymen. And with more carriers and 3PLs able to offer intermodal, there’s more of a chance for competitive negotiations—so explore the services of rail and highway carriers.

A second option for those with enough steady volume in established lanes is to contract for dedicated carriage.

Work a partnership with an asset-based provider that can enable the shipper to have transparency into key cost areas for the carrier and influence cost levers such as fuel, insurance, backhauls, and driver hours.  Intermodal may be a part of the mix in dedicated carriage if the shipper and carrier work to bring other parties into the network—perhaps suppliers and customers at ideal locations. Any contract for dedicated carriage needs to be set up from a distribution model jointly developed between carrier/equipment provider and the shipper. A key question to start with is whether the equipment is running full in all directions.

A third option that is ready to take center stage is the other mode in intermodal: water. I’m referring to the avoidance of land bridge (transcontinental) land movements by using water.

While we’ve used the Panama Canal for decades, the capacity of vessels is about to jump significantly, thus freeing up long-haul rail and truck capacity. Shippers should be doing the planning now and seeking out those service providers who will be taking advantage of this new capacity. 

However, with options we need tools. Today there are web-based modeling tools to do what-ifs on transportation. Shippers who have intermodal options or the density to support dedicated carriage are going to be able to expand their vision and that of their partners. There are asset-based and non-asset based providers who can bring these tools to the table. 

Shippers need to step up their game in the face of higher highway cost drivers. Look at the network today and after the new Panama Canal opens. Look at the extended network of suppliers and customers that you work with; and most importantly, begin to formally model your options together with your partners.


About the Author

Peter Moore
Peter Moore is Adjunct Professor of Supply Chain at Georgia College EMBA Program, Program Faculty at the Center for Executive Education at the University of Tennessee, and Adjunct Professor at the University of South Carolina Beaufort. Peter writes from his home in Hilton Head Island, S.C., and can be reached at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

Intermodal · May 2012 · Transportation · All Topics
Latest Whitepaper
Improving Packaging: The Cost of Shipping Air is Going Up
Retailers and manufacturers that insist on using inefficient and sloppy packaging methods—oversized boxes, inefficient packaging, poorly constructed palletized contents—are paying for their mistakes in sharply higher freight rates. Pitt Ohio White Paper, Logistics White Paper, Dimensional Packaging
Download Today!
From the July 2016 Issue
While it’s currently a shippers market, the authors of this year’s report contend that we’ve entered a “period of transition” that will usher in a realignment of capacity, lower inventories, economic growth and “moderately higher” rates. It’s time to tighten the ties that bind.
2016 State of Logistics: Third-party logistics
2016 State of Logistics: Ocean freight
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo